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Southern New England Telecommunications Corp · 10-K · For 12/31/93

Filed On 3/23/94   ·   Accession Number 790650-94-3   ·   SEC File 1-09157

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  As Of                Filer                Filing    For/On/As Docs:Size

 3/23/94  Southern New England Teleco..Corp 10-K       12/31/93   12:243K

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         33±   132K 
 2: EX-10       Nq Pension Plan                                        2±    11K 
 3: EX-10.1     Pension Plan                                           1      9K 
 4: EX-10.2     Mid-Career Pension Plan                                1      7K 
 5: EX-10.3     Disability Plan                                        9±    38K 
 6: EX-10.4     Exec. Retire Sav. Plan                                 1      9K 
 7: EX-12       Ratio                                                  1      6K 
 8: EX-13       Annual Report                                         48±   240K 
 9: EX-21       Subsidiaries                                           1      5K 
10: EX-23       Consent                                                1      8K 
11: EX-24       Power                                                  2±    13K 
12: EX-24.1     Resolution                                             1      8K 


10-K   —   Annual Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Item 1. Business
"State Regulation
"Intrastate Rates
"Interstate Rates
"Competition
"Item 2. Properties
"Item 3. Legal Proceedings
"Item 4. Submission of Matters to a Vote of Security Holders
"Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
"Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
"Item 14. Exhibits, Financial Statement Schedules, and Page Reports on Form 8-K


SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the fiscal year ended December 31, 1993 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from Commission File Number 1-9157 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION (Exact name of registrant as specified in its charter) Connecticut 06-1157778 (State or other (I.R.S. Employer jurisdiction of Identification Number) incorporation or organization) 227 Church Street, New Haven, CT 06510 (Address of principal (Zip Code) executive offices) 203) 771-5200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common stock-par value $1 New York and Pacific Stock per share Exchanges Rights to purchase common New York and Pacific Stock stock Exchanges (Currently traded with common stock) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x. No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x At February 28, 1994, 64,001,753 common shares were outstanding. At February 28, 1994, the aggregate market value of the voting stock held by non-affiliates was $2,022,514,890. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993 (Part II) (2) Portions of the registrant's definitive Proxy Statement dated March 28, 1994 issued in connection with the 1994 Annual Meeting of Stockholders (Part III) 1 TABLE OF CONTENTS Item Page 1. Business 3 2. Properties 15 3. Legal Proceedings 16 4. Submission of Matters to a Vote of Security Holders 16 PART II 5. Market for the Registrant's Common Stock and Related Shareholder Matters 18 6. Selected Financial Data 18 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 18 8. Financial Statements and Supplementary Data 18 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18 10. Directors and Executive Officers of the Registrant 18 11. Executive Compensation 18 12. Security Ownership of Certain Beneficial Owners and Management 18 13. Certain Relationships and Related Transactions 18 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K 19 See page 17 for "Executive Officers of the Registrant." 2 PART I Item 1. Business GENERAL Southern New England Telecommunications Corporation (the "Corporation") was incorporated in 1986 under the laws of the State of Connecticut and has its principal executive offices at 227 Church Street, New Haven, Connecticut 06510 (telephone number (203) 771-5200). The Corporation is a holding company engaged through its subsidiaries in operations principally in the State of Connecticut: The Southern New England Telephone Company (providing for the most part regulated telecommunications services and directory publishing services); SNET America, Inc. (providing interstate and international long distance services to Connecticut customers); SNET Cellular, Inc., SNET MobileCom, Inc. and SNET Paging, Inc. (providing personal communications services); SNET Diversified Group, Inc. (primarily engaged in the leasing of communications equipment to residential and business customers; and providing other telecommunications services not subject to regulation); and SNET Real Estate, Inc. (engaging in leasing commercial real estate). The Corporation furnishes financial and strategic planning, and stockholder relation functions on its own behalf and on behalf of its subsidiaries. THE SOUTHERN NEW ENGLAND TELEPHONE COMPANY The Southern New England Telephone Company ("Telephone Company"), a local exchange carrier ("LEC"), was incorporated in 1882 under the laws of the State of Connecticut and is engaged in the provision of telecommunications services in the State of Connecticut, most of which are subject to rate regulation. These telecommunications services include (i) local and intrastate toll services, (ii) exchange access service, which links customers' premises equipment ("CPE") to the facilities of other carriers, and (iii) other services such as digital transmission of data and transmission of radio and television programs, packet switched data network and private line services. Through its directory publishing operations, the Telephone Company publishes and distributes telephone directories throughout Connecticut and certain adjacent communities. In 1993, approximately 75% of the Corporation's consolidated revenues and sales were derived from the Telephone Company's rate regulated telecommunication services. The remainder were derived principally from the Corporation's other subsidiaries, directory publishing operations, and activities associated with the provision of facilities and non-access services to interexchange carriers. About 71% of the operating revenues from rate regulated services were attributable to intrastate operations, with the remainder attributable to interstate access services. 3 State Regulatory Matters The Telephone Company, in providing telecommunications services in the State of Connecticut, is subject to regulation by the Connecticut Department of Public Utility Control ("DPUC"), which has jurisdiction with respect to intrastate rates and services, and other matters such as the approval of accounting procedures, the issuance of securities and the setting of depreciation rates on telephone plant utilized in intrastate operations. The DPUC has adopted for intrastate ratemaking purposes accounting and cost allocation rules, similar to those adopted by the Federal Communications Commission ("FCC"), for the separation of costs of regulated from non-regulated activities. State Regulation On May 24, 1993, the DPUC issued a final decision on the capital recovery portion of the November 1992 rate request submitted by the Telephone Company ("Rate Request"). The Telephone Company was granted an increase in the composite intrastate depreciation rate from 5.7% to approximately 7.3%. This equated to an increase in Telephone Company revenue requirement of approximately $40 million annually. The new depreciation rates were implemented effective July 1, 1993. On July 7, 1993, the DPUC issued a final decision ("Final Decision-I") in its three-phase review of the current and future telecommunications requirements of Connecticut and a final decision ("Final Decision-II") in the remainder of the Rate Request docket. The Final Decision-I addressed the issues of (i) competition [see Item 1., "Competition"]; (ii) infrastructure modernization; (iii) rate design and pricing principles; and (iv) regulatory and legislative frameworks. With respect to "rate design and pricing principles," the DPUC stated that the pricing of all services must be more in line with the costs of providing these services. Historically, to provide universal service, basic residential services have been subsidized by other tariffed services, primarily message toll and business services. In regard to the regulatory and legislative framework, the DPUC endorsed the concept of incentive-based regulation as a potentially more effective and efficient regulatory system than the present rate of return regulation. The Final Decision-II authorized a rate of return on the Telephone Company's common equity ("ROE") of 11.65% and an increase in intrastate revenue of $37.5 million effective July 7, 1993. The Telephone Company was authorized previously to earn a 12.75% ROE. On August 13, 1993, the DPUC granted the Telephone Company an additional revenue requirement of $1.9 million to the $37.5 million previously awarded based on a review of certain areas requested by the Telephone Company. The total increase in intrastate revenue of $39.4 million is virtually offset by the approximate $40 million increase in capital recovery. In addition, the Final Decision-II addressed areas of infrastructure modernization and incentive regulation. Under infrastructure modernization, the Final Decision-II supported, but did not mandate, implementation of an infrastructure modernization program. On December 3, 1993, the Telephone Company sought approval from the DPUC to allow the Telephone Company to develop and provide electronic information services ("EIS"), including electronic publishing services. Since 1984, dramatic industry changes in technology, regulation and competition have eliminated any need for such a restriction. For the last three years, AT&T 4 and the Regional Bell Operating Companies ("RBOCs") have been permitted to enter the electronic publishing and information services markets. For the same reasons that the U.S. District Court lifted the ban on information services and electronic publishing services for AT&T and the RBOCs, the Company believes that the DPUC should lift the ban on the Telephone Company offering of EIS. A hearing in this matter is expected in the first half of 1994. State legislation, signed into law effective July 1, 1993, authorized the formation of a task force to study Connecticut's telecommunications infrastructure and policies. Draft legislation, based on the recommendations the task force submitted in February 1994, provides a framework to move forward with a new regulatory model for Connecticut. This model would move telecommunications toward a fully competitive marketplace and provide alternative forms of regulation. Overall, the goals of the draft legislation are to: (i) ensure high-quality and affordable universal telecommunications service for Connecticut customers; (ii) promote effective competition and the development of an advanced infrastructure; and (iii) enhance the efficiency of government, educational, and health care facilities through telecommunications. Intrastate Rates The Final Decision-II established rates designed to achieve the increase in intrastate revenue of $39.4 million. The following major provisions were included in the Final Decision-II: (i) reductions in intrastate toll rates including several toll discount plans; (ii) an increase in basic local exchange rates for residential and business customers to be phased in over a two-year period; (iii) a reduction in the pricing ratio gap between business and residential basic local service over a two-year period: (iv) a $7.00 per month Lifeline credit for low-income residential customer; (v) an increase in local calling service areas for most customers with none being reduced: (vi) an increase in the local coin telephone rate from $.10 to $.25; (vii) an increase in the directory assistance charge from $.24 to $.40 and a decrease in the number of "free" directory assistance calls; and (viii) a late payment charge of 1% monthly effective January 1, 1994. This rate award was implemented on July 9, 1993 through a combination of increases for coin telephone calls, directory assistance calls along with an approximate 15% interim surcharge on the remaining products and services with authorized increases including local exchange. On July 22, 1993, the DPUC issued a supplemental decision reducing the interim surcharge implemented on July 9, 1993 to approximately 8%. The Telephone Company issued credits during August of 1993 to customers who were charged at the higher rate. The 8% surcharge was in effect until October 9, 1993, when the remaining new rates became effective, including an average increase in residential basic local exchange rates of $.32 a month and a slight decrease in average monthly business rates. In addition, residential basic local exchange rates will increase $.31 a month and business rates will decrease an average of $.84 a month beginning in July 1994. At December 31, 1993, the Telephone Company's intrastate ROE was below the authorized 11.65%. Federal Regulatory Matters The Telephone Company is subject to the jurisdiction of the FCC with respect to interstate rates, services, video dial tone, access charges and other matters, including the prescription of a uniform system of accounts and the setting of depreciation rates on plant utilized in interstate operations. The FCC also prescribes the principles and procedures (referred to as "separations procedures") used to separate investments, revenues, expenses, taxes and reserves between the interstate and 5 intrastate jurisdictions. In addition, the FCC has adopted accounting and cost allocation rules for the separation of costs of regulated from non-regulated telecommunications services for interstate ratemaking purposes. ratemaking purposes. Federal Regulation On July 1, 1993, the FCC, in connection with its normal triennial review of depreciation, granted the Telephone Company new depreciation rates retroactive to January 1, 1993. The new rates increased depreciation expense by approximately $11 million in 1993. Under current price cap regulation, however, any changes in depreciation rates cannot be reflected in interstate access rates (see "Interstate Rates," below). On January 19, 1994, the Telephone Company filed suit in the U.S. District Court in New Haven claiming that the Cable Communications Policy Act of 1984 ("Cable Act") violates the Telephone Company's First and Fifth Amendment rights. The Cable Act limits the in-territory provision of cable programming by LECs such as the Telephone Company. The Cable Act currently prohibits LECs from owning more than 5% of any company that provides cable programming in their local service area. Since January 1, 1988, the Telephone Company has utilized an FCC approved, company specific Cost Allocation Manual ("CAM"), which apportions costs between regulated and non-regulated activities, and describes transactions between the Telephone Company and its affiliates. In addition, the FCC requires larger LECs, including the Telephone Company, to undergo an annual independent audit to determine whether the LEC is in compliance with its approved CAM. The Telephone Company has received audit reports for 1988 through 1992 indicating it is in compliance with its CAM, and is currently undergoing an audit for the year 1993. Interstate Rates The Telephone Company elected price cap regulation effective July 1, 1991. Under price cap regulation, which replaces traditional rate of return regulation, prices are no longer tied directly to the costs of providing service, but instead are capped by a formula that includes adjustments for inflation, assumed productivity increases, and "exogenous" factors, such as changes in accounting principles, in FCC cost separation rules, and taxes. The treatment as exogenous of various factors affecting a company's costs is subject to FCC interpretation. By electing price cap regulation, the Telephone Company is provided the opportunity to earn a higher interstate rate of return than that allowed under traditional rate of return regulation. However, price cap regulation presents additional risks since it establishes limits by which the Telephone Company is able to increase rates, even if the Telephone Company's interstate rate of return falls below the authorized rate of return. The Telephone Company is allowed to annually elect a productivity offset factor of 3.3% or 4.3%. Since price cap regulation was elected in July 1991, the Telephone Company has selected the 3.3% productivity factor and does not anticipate changing its election for the next tariff period. Choosing the 3.3% factor, the Telephone Company is allowed to earn up to a 12.25% interstate rate of return annually. Earnings between 12.25% and 16.25% would be shared equally with customers, and earnings over 16.25% would be returned to customers. Any amounts returned to customers would be in the form of prospective rate reductions. In addition, the Telephone Company's ability to achieve or exceed its interstate rate of 6 return will depend, in part, on its ability to meet or exceed the assumed productivity increase. As of December 31, 1993, the Telephone Company's interstate rate of return was below the 12.25% threshold. The Telephone Company filed tariffs under price cap regulation on April 2, 1993 which took effect on July 2, 1993, subject to the FCC's further investigation. The Telephone Company will file its 1994 annual interstate access tariff filing on April 1, 1994 to become effective July 1, 1994. The filing will adjust interstate access rates for an experienced rate of inflation, the FCC's productivity target, and exogenous cost changes, if any. In January 1994, the FCC began its scheduled inquiry into the price cap plan for LECs, to determine whether to revise the current plan to improve its performance in meeting the FCC's objectives. Results of this inquiry are expected in late 1994 or early 1995. In an order released on January 9, 1990, which did not directly apply to the Telephone Company, the FCC established a precedent whereby a customer has a right to recover damages if they can establish that a LEC exceeded its authorized rate of return. The FCC, in a March 1993 order responding to a complaint filed by Sprint Communications Company ("Sprint") alleging overearnings in switched traffic sensitive access charges, affirmed the Telephone Company's right to offset overearnings in one access category with underearnings in another category, and held that the Telephone Company had no liability. Sprint has appealed the order to the U.S. Court of Appeals. Regulated Operations The network access lines provided by the Telephone Company to customers' premises can be interconnected with the access lines of other telephone companies in the United States and with telephone systems in most other countries. The following table sets forth, for the Telephone Company, the number of network access lines in service at the end of each year and the number of intrastate toll and intrastate WATS messages handled for each year: 1993 1992 1991 1990 1989 Network Access Lines in Service 1,964 1,937 1,922 1,904 1,875 (in thousands) Intrastate Toll and WATS Messages 524 526 516 521 523 (in millions The Telephone Company has been making, and expects to continue to make, significant capital expenditures to meet the demand for regulated telecommunications services and to further improve such services (see discussion of I-SNET in "Competition"). The total gross investment in telephone plant increased from approximately $3.4 billion at December 31, 1988 to approximately $4.0 billion at December 31, 1993, after giving effect to retirements, but before deducting accumulated depreciation at either date. Since 1989, cash expended for capital additions was as follows: 7 Dollars in millions 1993 1992 1991 1990 1989 Cash Expended for Capital Additions $231.6 $269.1 $296.3 $370.0 $338.8 In 1993, the Telephone Company funded its cash expenditures for capital additions entirely through cash flows from operations. In 1994, capital additions are expected to be approximately $230 million. The Telephone Company expects to fund substantially all of its 1994 capital additions through cash flows from operations. The Telephone Company currently accounts for the economic effects of regulation in accordance with the provisions of SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation." In the event recoverability of operating costs through rates becomes unlikely or uncertain, whether resulting from competitive effects or specific regulatory actions, SFAS No. 71 would no longer apply. The financial impact of an accounting change, should the Telephone Company no longer qualify for the provisions of SFAS No. 71, would be material. Competition The Telephone Company's regulated operations are subject to competition from companies, carriers and competitive access providers which construct and operate their own communications systems and networks for the provision of services to others. At present, regulation continues to provide for a system of subsidies which prevent the Telephone Company's prices from moving toward the cost of providing the service. The Telephone Company's ability to compete depends to some degree on the action of regulators regarding the pricing of local, toll and network access services, and on the Telephone Company's continuing ability to manage its costs effectively. In the Final Decision-I, the DPUC concluded that currently authorized intrastate competition has not adversely affected either service availability or cost, and that a broadened scope of intrastate competitive participation was prudent and warranted. Accordingly, the DPUC found that 10XXX calling and resale competition were in the public interest and should be allowed beginning July 7, 1993 in accordance with recently enacted State legislation. Using 10XXX calling, customers can use any certified carrier for interexchange calling within Connecticut by dialing 1, 0, and XXX (a three-digit carrier code). Terms and conditions associated with the provision of specialized/ancillary services, including monitoring, reporting and compensation, would no longer apply. Since the issuance of Final Decision-I, several interexchange carriers have filed applications with and received approval from the DPUC to offer 10XXX intrastate long-distance service. In addition, a number of resellers have filed for initial certificates of public convenience and necessity. The Telephone Company anticipates additional applications will be filed. The introduction of competition to intrastate long- distance service and the Telephone Company's reduction in intrastate toll rates will further erode the Telephone Company's intrastate toll revenues. Pursuant to Final Decision-I, the Telephone Company filed on October 1, 1993 its proposed implementation plan for equal access based on customer preference for dual primary interexchange carrier capability (ability to choose one carrier for interstate calling and either the same or a different carrier for intrastate long distance calling). The Telephone Company's position 8 regarding cost recovery remains that interexchange carriers should pay for the direct costs of implementing equal access. Regarding competition for local exchange services, in January 1994, MCI announced plans to construct and operate local communication networks in large markets throughout the United States, including parts of Connecticut in which the Telephone Company operates. These networks would allow MCI to bypass the Telephone Company's facilities and provide services directly to customers. Pending DPUC approval, these services are expected to be available in Connecticut within two to three years. Also in January 1994, the Telephone Company announced that it had reached an agreement to lease part of its existing digital fiber optic ring network in the greater Hartford metropolitan area to MFS Communications, Inc ("MFS"). This agreement allows MFS to provide services to large business customers on an intraexchange basis and eliminates the need for MFS to construct their own facilities. Teleport Communications Group, another competitive access provider, recently announced plans to provide local telephone links for interstate services to businesses and long distance companies in the Hartford area. In an order adopted in September 1992, the FCC required certain LECs, including the Telephone Company, to offer expanded special access interconnection to all interested parties, permitting competitors to terminate their own transmission facilities in LEC central offices. The Telephone Company filed tariffs which were implemented in June 1993, subject to investigation, and was granted some additional pricing flexibility in light of this increased competition. In August 1993, the FCC adopted rules, which largely mirror the requirements adopted in September 1992 for special access interconnection, requiring certain LECs, including the Telephone Company, to offer expanded interstate switched access interconnection. The Telephone Company tariffs which implemented changes associated with switched access interconnection became effective in February 1994. The Telephone Company has received applications from competitive access providers for special access interconnection in selected central offices of the Telephone Company. The Telephone Company anticipates additional applications for both special and switched access interconnection will be filed. A number of LECs, including the Telephone Company, have appealed the FCC's orders to offer special and switched access interconnection. Oral arguments on the appeal of the special access order were heard in February 1994 with a decision expected later in 1994. The appeal of the switched access order has been delayed pending a decision on the special access appeal. The Telephone Company, expecting to see continued movement toward a fully competitive telecommunications marketplace, both on an interexchange and intraexchange basis, has taken several steps to effectively position itself. On January 13, 1994, the Telephone Company announced its intention to invest $4.5 billion over the next 15 years to build a statewide information superhighway ("I-SNET"). I-SNET will be an interactive multimedia network capable of delivering voice, video and a full range of information and interactive services. The Telephone Company expects I-SNET will reach approximately 500,000 residences and businesses thru 1997. In addition, the Telephone Company has reduced its intrastate toll rates beginning in July 1993 [see Item 1., "Intrastate Rates"], is committed to reducing its cost structure, remains focused on providing quality customer service and has introduced several new services as mentioned below. 9 New Services On March 31, 1993, the Telephone Company together with Sprint announced the introduction of 800 CustomLink Service (service mark). This service allows the Telephone Company to offer it business customers an 800 service enabling them to receive calls from anywhere in the United States as well as international locations. In 1993, the Telephone Company launched the next generation of CentraLink products, CentraLink (service mark) 3100. CentraLink 3100 is a central-office based product that allows flexibility to add additional phone lines, locations and features to adapt to customers' changing telecommunications requirements. In 1993, the Corporation established SNET America, Inc. ("SNET America") under the laws of Connecticut. SNET America offers a complete range of interstate and international long distance services to Connecticut customers, including calling card and 800 service, along with volume discount plans such as Distance Plus (service mark). Distance Plus offers graduated discounts where the discount increases as the usage increases. SNET America began offering service in the third quarter of 1993. Under a proposed marketing arrangement between the Telephone Company and SNET America filed with the DPUC on January 7, 1994, the Telephone Company anticipates selling SNET America's interstate and international products, and SNET America will sell the Telephone Company's intrastate products. This arrangement will enable the Corporation to satisfy its customers complete long distance calling needs with a single point of contact. On October 21, 1993, the FCC approved the Telephone Company's application to construct, operate, own, and maintain facilities to conduct a technology and marketing trial for use in providing video dial tone service in West Hartford, Connecticut. With construction of the fiber optic and coaxial facilities completed, the trial began in early 1994. The trial, offered to approximately 500 customers, provides hundreds of choices of videos. On December 15, 1993, the Telephone Company filed a request with the FCC for an expansion of this trial. The proposal seeks to provide this service to an additional 20,000 customers in other areas of Connecticut. On December 22, 1993, the Telephone Company filed with the DPUC its application to conduct a market trial for Digital Enhancer, an Integrated Services Digital Network offering. Digital Enhancer provides customers with integrated voice and data communications capabilities on a single telephone access line. Digital Enhancer will be offered from specially equipped digital central offices and will require customer- provided terminal equipment to access and use the service. This service will enable customers to reduce their telecommunications costs by reducing wiring requirements, increase productivity through increased data transmission speed, and improve quality of service through reduced data error rates. Directory Publishing The Telephone Company's directory publishing operation remains sensitive to the Connecticut economy. The continuing decline in new business formations and the acceleration of business failures within the State will further suppress advertising growth potential in the near term. 10 The Connecticut advertising marketplace continues to undergo major structural changes and is becoming increasingly more fragmented and competitive. Directory publishing faces potential increased competition from non-traditional services such as desktop publishing, electronic shopping services and the expansion of cable television. Furthermore, additional competition may arise from the regional BOCs' ability to now offer information services. The Telephone Company's directory publishing operation will continue to strategically widen its business focus and respond to emerging market opportunities to position itself effectively against this potential competition [see discussion of EIS in Item 1., "State Regulation"]. 11 PERSONAL COMMUNICATIONS SERVICES The Corporation provides personal communications services, which consist of wholesale and retail cellular telephone communications and paging services, through its subsidiaries SNET Cellular, Inc. ("Cellular"), SNET MobileCom, Inc. ("MobileCom") and SNET Paging, Inc. ("Paging"). SNET Cellular, Inc. Cellular was incorporated in 1985 under the laws of the State of Connecticut. In 1990, Cellular formed the Springwich Cellular Limited Partnership ("Springwich") with NYNEX Mobile Communications Company ("NYNEX Mobile"), The Granby Telephone and Telegraph Company of Massachusetts, Inc., The Woodbury Telephone Company and a fifth partner (New York SMSA Limited Partnership, of which NYNEX Mobile is the managing partner). Springwich is authorized to provide wholesale cellular radio telecommunications services in the Hartford, New Haven, New London, and Fairfield, Connecticut New England County Metropolitan Areas ("NECMAs") and in the Springfield, Massachusetts NECMA. Springwich also is licensed to provide cellular wholesale service in three Rural Service Areas ("RSA"), Windham and Litchfield Counties in Connecticut and Franklin County in Massachusetts. The combined population of this region is approximately 4 million. Springwich is currently subject to FCC, DPUC and the Massachusetts Department of Public Utility jurisdictions. In January of 1993, Cellular incorporated SNET Springwich, Inc. ("SSI"), a wholly owned subsidiary of Cellular. Cellular transferred a 32% general partnership interest in Springwich to SSI in both 1993 and 1994 and anticipates transferring the remaining 18.5% partnership interest in Springwich to SSI in 1995. Springwich has "roamer agreements" with other cellular carriers which allow customers of Springwich access to cellular markets throughout the United States and Canada and allow customers of other carriers to use Springwich's network. On July 31, 1990, Springwich petitioned the DPUC to initiate a proceeding to address whether the conditions necessary to forebear from rate regulation of cellular mobile telephone service in Connecticut NECMAs were present, as required of the DPUC under Connecticut legislation enacted in 1985. Subsequent to the petition, the DPUC initiated a proceeding (Docket No. 90-08-03) to address this issue. In 1991, the DPUC issued a decision denying Springwich's petition for forbearance citing that the record did not indicate that forbearance would enhance or expedite the evolution of the cellular marketplace. On December 16, 1992, the DPUC reopened Docket No. 90-08-03 to reconsider its 1991 decision. The DPUC closed this docket on December 15, 1993 without a decision. Pursuant to a recent federal law, state regulation of cellular activities is pre-empted unless the FCC approves a petition by the state regulatory agency to continue its regulatory scheme. Such a filing, if one is to be made, must be done by August 10, 1994., In February 1993, Cellular announced that it had joined with other major mobile communications companies to form MobiLink (service mark) Partners. In July 1993, the MobiLink Partners set common standards for cellular service nationwide under the new brand name Mobilink (service mark). Mobilink includes a number of innovations designed to make cellular service easier to use and accessible to more cellular phone users across much of the United States and Canada. 12 On October 22, 1993, the FCC issued a report and order allocating radio spectrum to be licensed for use in providing personal communications services ("PCS"). These bandwidths of spectrum could provide new services such as advanced voice paging, two-way acknowledgment paging, data messaging, electronic mail and facsimile transmissions. Under the order, separate bandwidths would be auctioned to potential PCS providers in each geographic area of the United States. The FCC is seeking comments on the design of the auction process, financing alternatives for special interest licenses, and the classes of licenses and permits that should be included in the competitive bidding process. The auction of these bandwidths of spectrum will allow additional competitors to enter the market place Springwich serves. In 1992, Bell Atlantic Corporation ("Bell Atlantic") completed the acquisition of Metro Mobile CTS, Inc., a non-wireline provider of cellular services that operates in Springwich markets. Bell Atlantic, which operates under the name Bell Atlantic Mobile, has substantial capital, technological and marketing resources. Cellular has made and will continue to make significant investments in network expansion and enhancements in order to effectively compete. SNET MobileCom, Inc. MobileCom was incorporated in 1985 under the laws of the State of Connecticut. MobileCom purchases wholesale cellular communications service from Springwich and resells cellular communications service to the retail market under the servicemark LINX in Springwich's serving area. MobileCom markets its services through its internal sales force and through agreements with third-party distributors. MobileCom anticipates continuing competition from local, regional and national resellers. Over the past few years, intense competition for new customers has led to increases in selling and promotional costs. MobileCom anticipates that this trend will continue into the foreseeable future. In response to this competition, MobileCom has offered a new cellular service plan called Linx Omni that provides customers with a package of cellular services plus a free cellular phone when the customer signs a 24 month service agreement. SNET Paging, Inc. Paging was incorporated in February 1990 under the laws of the State of Connecticut. Paging launched service on April 1, 1991. Paging provides its customers with tone, numeric and alphanumeric paging services through its service trademark Page 2000 (service mark). Customers have a choice of either selecting local or regional coverage. Paging also serves as a reseller of SkyTel, a nationwide paging service. Currently Paging's network is capable of providing services in Connecticut, most of Massachusetts, southern New Hampshire, Rhode Island, Metropolitan New York City, and northern New Jersey. TNI Associates, Inc. ("TNIA"), formerly SNET Paging Acquisition Corporation, a wholly owned subsidiary of Paging, also was formed in February 1990 under the laws of the State of Connecticut. In October 1993, TINA purchased the remaining 50.5% partnership interest in the net assets of TNI Associates (the "TNI Partnership") from Telecommunications Network, Inc. The 13 TNI Partnership business purchased by TNIA operates a wide area paging network covering the seaboard area from Metropolitan New York to southern New Jersey and Philadelphia. Paging has three primary competitors in the Northeast region it serves. One is dominant in the Connecticut marketplace and is perceived as offering competitive pricing and a high quality network. The second offers multistate and regional services that focus on large metropolitan markets with less emphasis on Connecticut. The last is a large national carrier that offers the lowest price with an apparent strategy of building market share rapidly. SNET DIVERSIFIED GROUP, INC. SNET Diversified Group, Inc. ("Diversified") was incorporated in 1986 under the laws of the State of Connecticut in order to identify and develop new, non-regulated business opportunities. The majority of Diversified's activities are leasing and selling CPE to residential and small business customers. Prior to 1988, embedded CPE was leased under regulation to customers by the Telephone Company. As part of the 1993 SNET Systems, Inc. ("Systems") reorganization, Diversified established a new division, Business Communications, which continues to offer and maintain certain key products that are complementary to the Telephone Company's central-office based solutions. SNET Premium Services, which offers network related activities such as ConnNet (service mark) and Conference Calling, was transferred from the Telephone Company to Diversified effective January 1, 1993. Diversified faces significant competition from numerous department store, discount store, and business equipment retailers that carry CPE. Diversified has differentiated its product line from its competitors by offering a wide array of quality products coupled with superior customer assistance and by offering customers leasing options. SNET REAL ESTATE, INC. SNET Real Estate, Inc. ("Real Estate") was incorporated in 1983 under the laws of the State of Connecticut. Real Estate is an owner of commercial property which it leases under operating leases and is a participant in a partnership that also leases commercial property. Currently, Real Estate is managing its existing portfolio and is not actively pursuing additional real estate investments. Real Estate faces a risk that real estate markets in which its properties are located, primarily Connecticut, may further deteriorate from their current condition. This risk is minimized by the conservative nature of Real Estate's portfolio, a majority of which is leased to affiliates. SNET SYSTEMS, INC. SNET Systems, Inc. ("Systems") was incorporated in 1986 under the laws of the State of Connecticut and was subsequently dissolved in December 1993. Systems marketed a full range of sophisticated communications systems and services primarily to large business customers as well as provided consulting, installation and maintenance services related to communications systems. 14 On January 15, 1993, the Corporation announced that it would disband Systems and reassign its functions and employees to other organizations within the Corporation. This reorganization of Systems' operations is in line with the Corporation's strategy to focus on the Telephone Company's central-office based solutions. As discussed previously, a new division of Diversified, Business Communications, was formed as a result of this reorganization and will continue to offer and maintain certain key products that are complementary to central-office based solutions. SNET CREDIT, INC. SNET Credit, Inc. ("Credit") was incorporated in 1983 under the laws of the State of Connecticut. Credit provided lease financing of telecommunications and other equipment for Systems and third parties under operating, direct-financing and leveraged leases. In September 1992, the Corporation announced its intention to withdraw from the finance business by phasing out the activities of Credit because it no longer fit into the Corporation's long-term strategic business plan. During the first and second quarters of 1993, Credit sold portions of its direct-financing lease portfolio. Certain existing leveraged leases and direct financing leases have been retained as investments. Employee Relations The Corporation and its subsidiaries employed approximately 9,820 persons at February 28, 1994, of whom approximately 68% are represented by The Connecticut Union of Telephone Workers, Inc. ("CUTW"), an unaffiliated union. In December 1993, the Corporation announced a business restructuring program designed to reduce costs and will result in approximately 2,500 employees exiting the business over the next two to three year period. Item 2. Properties The principal properties of the Corporation and its subsidiaries do not lend themselves to a detailed description by character and location. The majority of telecommunications plant, property and equipment of the Corporation and its subsidiaries is owned by the Telephone Company. Of the Corporation's investment in telecommunications plant, property and equipment at December 31, 1993, central office equipment represented 39%; connecting lines not on customers' premises, the majority of which are on or under public roads, highways or streets and the remainder on or under private property, represented 35%; land and buildings (occupied principally by central offices) represented 12%; telephone instruments and related wiring and equipment, including private branch exchanges, substantially all of which are on the premises of customers, represented 2%; and other, principally vehicles and general office equipment, represented 12%. Substantially all of the central office equipment installations and administrative offices are located in Connecticut in buildings owned by the Telephone Company situated on land which it owns in fee. Many garages, service centers and some administrative offices are located in rented quarters. 15 The Corporation has a significant investment in the properties, facilities and equipment necessary to conduct its business wherein the overwhelming majority of this investment relates to telephone operations. Management believes that the Corporation's facilities and equipment are suitable and adequate for the business. As discussed previously, the Telephone Company plans to invest $4.5 billion over the next 15 years to build I-SNET. The Telephone Company plans to support this investment primarily through increased productivity from the new technology deployed, ongoing cost containment initiatives and customer demand for the new services offered. The Telephone Company does not plan to request a rate increase for this investment. Item 3. Legal Proceedings The Corporation and certain of its subsidiaries are involved in various claims and lawsuits that arise in the normal conduct of their business. In the opinion of management, upon advice of counsel, these claims will not have a material adverse effect on the Telephone Company or the Corporation. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders in the fourth quarter of the fiscal year covered by this report. 16 Executive Officers of the Registrant (1) (as of January 1, 1994) Executive Officer Name Age(2) Position Since Daniel J. Miglio 53 Chairman, President and Chief Executive Officer 1/86 Robert F. Neal 58 Senior Vice President- Organization Development 1/87 Ronald M. Serrano 38 Senior Vice President- Corporate Development 1/93 Donald R. Shassian 38 Senior Vice President and Chief Financial Officer 12/93 Madelyn M. DeMatteo 45 Vice President, General Counsel and Secretary 5/90 John A. Sadek 60 Vice President and Comptroller 1/86 (1) Includes executive officers subject to Section 16 of the Securities Exchange Act of 1934. (2) As of December 31, 1993. Mr. Miglio, Mr. Neal, Mr. Sadek and Ms. DeMatteo have held high level managerial positions with the Corporation or its subsidiaries for more than the past five years. Mr. Serrano was a Vice President of Mercer Management Consulting, Inc., (formerly Strategic Planning Associates) for more than five years prior to joining the Corporation. Mr. Shassian was a partner with Arthur Andersen & Co., independent accountants, for more than five years prior to joining the Corporation. 17 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The common stock of the Corporation is listed on the New York and Pacific stock exchanges and the number of holders of record, computed on the basis of registered accounts, were approximately 57,177 as of February 28, 1994. Information with respect to the quarterly high and low sales price for the Corporation's common stock and quarterly cash dividends declared is included in the registrant's Annual Report to Stockholders on page 48 under the caption "Market and Dividend Data" and is incorporated herein by reference pursuant to General Instruction G(2). Items 6 through 8. Information required under Items 6 through 8 is included in the registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993 on pages 18 through 47 in their entirety and is incorporated herein by reference pursuant to General Instruction G(2). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No changes in or disagreements with accountants on any accounting or financial disclosure occurred during the period covered by this report. PART III Items 10 through 13. Information required under Items 10 through 13 is included in the registrant's Proxy Statement dated March 28, 1994 on pages 1 (commencing under the caption "Proxy Statement") through 17. Such information is incorporated herein by reference. Information regarding executive officers of the registrant required by Item 401(b) and (e) of Regulation S-K is included in Part I of this Annual Report on Form 10-K following Item 4. 18 PART IV Item 14. Exhibits, Financial Statement Schedules, and Page Reports on Form 8-K (a) Documents filed as part of the report: (1) Report on Consolidated Financial Statements * Report of Audit Committee * Report of Independent Accountants * Consolidated Financial Statements: Consolidated Statement of (Loss) Income - for the years ended December 31, 1993, 1992 and and 1991 * Consolidated Balance Sheet - as of December 31, 1993 and 1992 * Consolidated Statement of Changes in * Stockholders' Equity - for the years ended December 31, 1993, 1992, 1991 * Consolidated Statement of Cash Flows - for the years ended December 31, 1993, 1992 and 1991 * Notes to Consolidated Financial Statements * (2) Consolidated Financial Statement Schedules for the year ended December 31, 1993 Report of Independent Accountants 24 V - Telecommunications Plant, Property and 25 Equipment VI - Accumulated Depreciation 29 VIII - Valuation and Qualifying Accounts 30 Schedules other than those listed above have been omitted because the required information is contained in the financial statements and notes thereto, or because such schedules are not applicable. * Incorporated herein by reference to the appropriate portions of the registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1993 (see Part II). 19 (3) Exhibits: Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Exhibit Number 3a Amended and Restated Certificate of Incorporation of the registrant as filed June 14, 1990 (Exhibit) 3-A to Form SE dated 3/15/91, File No. 1-9157). 3b By-Laws of the registrant as amended and restated through October 10, 1990 (Exhibit 3 to Form 8-K dated 10/10/90, File No. 1-9157). 4a Rights Agreement dated February 11, 1987 between Southern New England Telecommunications Corporation and The State Street Bank and Trust Company, as Rights Agent (Exhibit 1 to Form SE dated 2/13/87-1, File No. 1-9157). Amendment No. 1 dated December 13, 1989 (Exhibit 4 to Form SE dated 12/28/89, File No. 1-9157). Amendment No. 2 dated October 10, 1990 (Exhibit 4 to Form SE dated 10/12/90, File No. 1-9157). 4b No instrument which defines the rights of holders of long-term debt of the registrant is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request. 10 (iii)(A)1 SNET Short Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)1 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)2 SNET Long Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)2 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)3 SNET Financial Counseling Program as amended January 1987 (Exhibit 10-D to Form SE dated 3/23/87-1, File No. 1-9157). 10 (iii)(A)4 Group Life Insurance Plan and Accidental Death and Dismemberment Benefits Plan for Outside Directors of SNET as amended July 1, 1986 (Exhibit 10-E to Form SE dated 3/23/87-1, File No. 1-9157). 10 (iii)(A)5 SNET Executive Non-Qualified Pension Plan and Excess Benefit Plan as amended November 1, 1991 (Exhibit 10-A to Form SE dated 3/20/92, File No. 1-9157). Amendments dated December 8, 1993. 20 (3) Exhibits (continued): Exhibit Number 10 (iii)(A)6 SNET Management Pension Plan as amended November 1, 1987 (Exhibit 10-C to Form SE dated 3/21/88-1, File No. 1-9157). Amendments dated September 1, 1988 and January 1, 1989 (Exhibit 10-C to Form SE dated 3/21/89, File No. 1-9157). Amendments dated January 1, 1989 through August 6, 1989 (Exhibit 10-B to Form SE dated 3/20/90, File No. 1-9157). Amendments dated June 5, 1991 through September 25, 1991 (Exhibit 10-B to Form SE dated 3/20/92, File No. 1-9157). Amendments dated January 1, 1993 (Exhibit 10(iii)(A)6 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). Amendments dated September 8, 1993 through December 8, 1993. 10 (iii)(A)7 SNET Incentive Award Deferral Plan as amended March 1, 1993 (Exhibit 10(iii)(A)7 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)8 SNET Mid-Career Pension Plan as amended November 1, 1991 (Exhibit 10-D to Form SE dated 3/20/92, File No. 1-9157). Amendments dated December 8, 1993. 10 (iii)(A)9 SNET Deferred Compensation Plan for Non-Employee Directors as amended January 1, 1993 (Exhibit 10(iii)(A)9 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)10 Change-in-Control Agreements (Exhibit 10-F to Form SE dated 3/15/91, File No. 1-9157). 10 (iii)(A)11 SNET 1986 Stock Option Plan as amended March 1, 1993 (Exhibit 10(iii)(A)11 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)12 SNET Retirement and Disability Plan for Non- Employee Directors as amended April 14, 1993. 10 (iii)(A)13 SNET Non-Employee Director Stock Plan effective January 1, 1994 (Exhibit 4.4 to Registration No. 33-51055, File No. 1-9157) 10 (iii)A)14 Description of SNET Executive Retirement Savings Plan. 12 Computation of Ratio of Earnings to Fixed Charges. 13 Pages 18 through 48 of the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1993. 21 Subsidiaries of the Corporation. 23 Consent of Independent Accountants. 21 (3)Exhibits (continued): Exhibit Number 24a Powers of Attorney. 24b Board of Directors' Resolution. 99a Annual Report on Form 11-K for the plan year ended December 31, 1993 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1994. 99b Annual Report on Form 11-K for the plan year ended December 31, 1993 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1994. The Corporation will furnish, without charge, to a stockholder upon request a copy of the Annual Report to Shareholders and Proxy Statement, portions of which are incorporated by reference, and will furnish any other exhibit at cost. (b) Reports on Form 8-K: On November 3, 1993, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated November 3, 1993, announcing that effective December 1, 1993, Donald R. Shassian, will assume the position of Senior Vice President and Chief Financial Officer of both the Corporation and the Telephone Company. On December 8, 1993, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated December 8, 1993, announcing charges against fourth quarter earnings totaling $4.08 per common share. These charges include a restructuring charge for workforce and reengineering reductions, a refinancing charge and a charge for discontinued operations. On January 25, 1994, the Corporation and the Telephone Company filed, separately, reports on Form 8-K, dated January 24, 1994, announcing the Corporation's 1993 financial results. 22 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION By /s/ J. A. Sadek J. A. Sadek, Vice President and Comptroller, March 23, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. PRINCIPAL EXECUTIVE OFFICER: D. J. Miglio* Chairman, President, Chief Executive Officer and Director PRINCIPAL FINANCIAL AND ACCOUNTING OFFICERS: D. R. Shassian* Senior Vice President and Chief Financial Officer J. A. Sadek By /s/ J. A. Sadek Vice President and Comptroller (J. A. Sadek, as attorney-in-fact and on his own behalf) DIRECTORS: F. G. Adams* William F. Andrews* Richard H. Ayers* Zoe Baird* Barry M. Bloom* F. J. Connor* William R. Fenoglio* March 23, 1994 Claire L. Gaudiani* J. R. Greenfield* N. L. Greenman* Worth Loomis* Burton G. Malkiel* Frank R. O'Keefe, Jr.* *by power of attorney 23 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of Southern New England Telecommunications Corporation: Our report on the consolidated financial statements of Southern New England Telecommunications Corporation has been incorporated by reference in this Form 10-K from the 1993 Annual Report to Stockholders of Southern New England Telecommunications Corporation on page 29 therein. In connection with our audits of such financial statements, we have also audited the related financial statement schedules for each of the three years in the period ended December 31, 1993 listed in Item 14 (a) (2) of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Hartford, Connecticut COOPERS & LYBRAND January 24, 1994 24 Schedule V - Sheet 1 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION SCHEDULE V--TELECOMMUNICATIONS PLANT, PROPERTY and EQUIPMENT (Millions of Dollars) COL. A COL. B COL. C COL. D COL. E COL. F Balance at Additions Retirements Other Balance Year 1993 beginning at cost - Note (b) Changes at end Classification of period - Note(a) - Note (c) of period Land $ 28.4 $ .7 $ - $ - $29.1 Buildings 437.9 27.8 9.2 .7 457.2 Central Office Equipment 1,631.5 116.4 94.2 8.6 1,662.3 Station Apparatus 59.5 8.5 .6 (3.8) 63.6 Large Private Branch Exchange 9.2 - 8.4 - .8 Pole Lines 135.6 5.5 2.4 .2 138.9 Cable 1,083.6 50.8 13.6 .1 1,120.9 Underground Conduit 212.3 9.5 .7 (.9) 220.2 Public Telephone Equipment 16.9 4.3 (1.7) - 22.9 Other Communica- tions Equipment 65.8 7.2 1.9 - 71.1 Furniture and Office Equipment 300.7 44.5 24.0 (.4) 320.8 Vehicles and Other Work Equipment 108.0 8.6 9.9 - 106.7 Telecommunications Plant Property and Equipment Under Construction 84.0 2.1 - (6.6) 79.5 Other 2.0 1.4 - 1.0 4.4 TOTAL (d) $4,175.4 $287.3 $163.2 $(1.1) $4,298.4 The notes on Sheet 4 are an integral part of this Schedule. 25 Schedule V - Sheet 2 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION SCHEDULE V--TELECOMMUNICATIONS PLANT, PROPERTY and EQUIPMENT (Millions of Dollars) COL. A COL. B COL. C COL. D COL. E COL. F Balance at Additions Retirements Other Balance Year 1992 beginning at cost - Note (b) Changes at end Classification of period - Note(a) - Note (c) of period Land $ 27.4 $ .8 $ - $ .2 $28.4 Buildings 423.3 21.9 4.9 (2.4) 437.9 Central Office Equipment 1,578.1 136.4 84.0 1.0 1,631.5 Station Apparatus 74.4 9.8 24.8 .1 59.5 Large Private Branch Exchange 11.5 - 2.3 - 9.2 Pole Lines 131.3 5.9 1.6 - 135.6 Cable 1,029.8 69.2 15.3 (.1) 1,083.6 Underground Conduit 197.4 15.1 .2 - 212.3 Public Telephone Equipment 19.3 .5 2.9 - 16.9 Other Communica- tions Equipment 63.6 5.9 3.6 (.1) 65.8 Furniture and Office Equipment 281.5 30.7 11.0 (.5) 300.7 Vehicles and Other Work Equipment 99.6 15.5 6.8 (.3) 108.0 Telecommunications Plant Property and Equipment Under Construction 92.7 (7.9) - (.8) 84.0 Other 1.0 1.0 - - 2.0 TOTAL (d) $4,030.9 $304.8 $157.4 $(2.9) $4,175.4 The notes on Sheet 4 are an integral part of this Schedule. 26 Schedule V - Sheet 3 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION SCHEDULE V--TELECOMMUNICATIONS PLANT, PROPERTY and EQUIPMENT (Millions of Dollars) COL. A COL. B COL. C COL. D COL. E COL. F Balance at Additions Retirements Other Balance Year 1991 beginning at cost - Note (b) Changes at end Classification of period - Note(a) - Note (c) of period Land $ 27.3 $ .1 $ - $ - $27.4 Buildings 396.9 27.8 1.4 - 423.3 Central Office Equipment 1,545.2 135.6 91.2 (11.5) 1,578.1 Station Apparatus 80.0 4.2 9.8 - 74.4 Large Private Branch Exchange 13.0 - 1.5 - 11.5 Pole Lines 124.6 7.7 1.0 - 131.3 Cable 979.3 65.6 15.1 - 1,029.8 Underground Conduit 188.1 9.5 .2 - 197.4 Public Telephone Equipment 18.4 1.0 .1 - 19.3 Other Communica- tions Equipment 59.5 6.3 2.2 - 63.6 Furniture and Office Equipment 256.9 35.1 24.6 14.1 281.5 Vehicles and Other Work Equipment 92.3 14.8 4.9 (2.6) 99.6 Telecommunications Plant Property and Equipment Under Construction 82.9 9.8 - - 92.7 Other .1 .9 - - 1.0 TOTAL (d) $3,864.5 $318.4 $152.0 $ - $4,030.9 The notes on Sheet 4 are an integral part of this Schedule. 27 Schedule V - Sheet 4 Notes to Schedule V (a) For regulated telephone plant, additions shown include (1) the original cost of reused material, which is concurrently credited to Material and Supplies, and (2) an Allowance for Funds Used During Construction. (b) Items of telecommunications plant, property and equipment when retired, sold or reclassified are deducted from the property accounts at original cost. (c) Represents current year transfers between classifications, and other minor adjustments. (d) For interstate telephone plant, the FCC has approved the equal life group ("ELG") depreciation method using a remaining-life formula on a phased-in basis beginning in 1982. Vintages of interstate plant in service prior to the phase-in of ELG are being depreciated using a composite vintage group method. In addition, the FCC approved the use of straight-line amortization effective January 1, 1987 to recover an interstate reserve deficiency over a five-year period ended December 31, 1993. For intrastate plant, the DPUC approved ELG for 1993 vintages and subsequent periods. Vintages of intrastate plant in service prior to 1993 are being depreciated using a composite vintage group method. For the years 1993, 1992 and 1991, depreciation expense on telecommunications plant expressed as a percentage of average depreciable plant was 7.0%, 6.2% and 6.6%, respectively. Property and equipment other than regulated telephone plant is depreciated primarily using the straight-line method over the estimated useful lives of the assets. Assets acquired under capital leases are generally amortized over the life of the lease using the straight-line method. 28 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION SCHEDULE VI--ACCUMULATED DEPRECIATION (Millions of Dollars) COL. A COL. B COL. C COL. D COL. E COL. F Balance at Additions Retirements Other Balance beginning charged - Note (a) Changes at end Description of period to expense of period Year 1993 $1,408.0 $286.8 $162.4 $(4.2) $1,528.2 Year 1992 1,318.7 247.6 157.1 (1.2) 1,408.0 Year 1991 1,221.5 251.5 154.7 .4 1,318.7 (a) Includes net salvage. (b) Columns B and F include accumulated depreciation on the Corporation's nonregulated telecommunications plant, property and equipment, which is shown net of such accumulated depreciation in Note 13 to the consolidated financial statements. 29 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORPORATION SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS (Millions of Dollars) COL. A COL. B COL. C COL. D COL. E COL. F Additions Balance at Additions Charged Balance beginning charged to to other Deductions at end Description of period expense accounts - Note B of -Note (a) period Allowance for Uncollectible Accounts Receivable: Year 1993 $21.8 $ 28.9 $3.6 $27.6 $ 26.7 Year 1992 16.3 33.3 3.9 31.7 21.8 Year 1991 10.3 31.7 3.6 29.3 16.3 Allowance for Uncollectible Direct-Financing Lease Notes Receivable of Discontinued Operations: Year 1993 $ 8.2 $ 15.6 $ - $12.1 $ 11.7 Year 1992 4.6 9.2 - 5.6 8.2 Year 1991 2.7 4.8 - 2.9 4.6 Restructuring Charge: Year 1993 $ - $355.0 $ - $ - $355.0 (a) Includes amounts previously written off that were credited directly to this account when recovered and miscellaneous debits and credits. (b) Includes amounts written off as uncollectible. 30 Exhibit Index Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto. Exhibit Number 3a Amended and Restated Certificate of Incorporation of the registrant as filed June 14, 1990 (Exhibit) 3-A to Form SE dated 3/15/91, File No. 1-9157). 3b By-Laws of the registrant as amended and restated through October 10, 1990 (Exhibit 3 to Form 8-K dated 10/10/90, File No. 1-9157). 4a Rights Agreement dated February 11, 1987 between Southern New England Telecommunications Corporation and The State Street Bank and Trust Company, as Rights Agent (Exhibit 1 to Form SE dated 2/13/87-1, File No. 1-9157). Amendment No. 1 dated December 13, 1989 (Exhibit 4 to Form SE dated 12/28/89, File No. 1-9157). Amendment No. 2 dated October 10, 1990 (Exhibit 4 to Form SE dated 10/12/90, File No. 1-9157). 4b No instrument which defines the rights of holders of long-term debt of the registrant is filed herewith pursuant to Regulation S-K, Item 601(b)(4)(iii)(A). Pursuant to this regulation, the registrant hereby agrees to furnish a copy of any such instrument to the SEC upon request. 10 (iii)(A)1 SNET Short Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)1 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)2 SNET Long Term Incentive Plan as amended March 1, 1993 (Exhibit 10(iii)(A)2 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)3 SNET Financial Counseling Program as amended January 1987 (Exhibit 10-D to Form SE dated 3/23/87-1, File No. 1-9157). 10 (iii)(A)4 Group Life Insurance Plan and Accidental Death and Dismemberment Benefits Plan for Outside Directors of SNET as amended July 1, 1986 (Exhibit 10-E to Form SE dated 3/23/87-1, File No. 1-9157). 10 (iii)(A)5 SNET Executive Non-Qualified Pension Plan and Excess Benefit Plan as amended November 1, 1991 (Exhibit 10-A to Form SE dated 3/20/92, File No. 1-9157). Amendments dated December 8, 1993. 10 (iii)(A)6 SNET Management Pension Plan as amended November 1, 1987 (Exhibit 10-C to Form SE dated 3/21/88-1, File No. 1-9157). Amendments dated September 1, 1988 and January 1, 1989 (Exhibit 10-C to Form SE dated 3/21/89, File No. 1-9157). Amendments dated January 1, 1989 through August 6, 1989 (Exhibit 10-B to Form SE dated 3/20/90, File No. 1-9157). Amendments dated June 5, 1991 through September 25, 1991 (Exhibit 10-B to Form SE dated 3/20/92, File No. 1-9157). Amendments dated January 1, 1993 (Exhibit 10(iii)(A)6 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). Amendments dated September 8, 1993 through December 8, 1993. 10 (iii)(A)7 SNET Incentive Award Deferral Plan as amended March 1, 1993 (Exhibit 10(iii)(A)7 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)8 SNET Mid-Career Pension Plan as amended November 1, 1991 (Exhibit 10-D to Form SE dated 3/20/92, File No. 1-9157). Amendments dated December 8, 1993. 10 (iii)(A)9 SNET Deferred Compensation Plan for Non-Employee Directors as amended January 1, 1993 (Exhibit 10(iii)(A)9 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)10 Change-in-Control Agreements (Exhibit 10-F to Form SE dated 3/15/91, File No. 1-9157). 10 (iii)(A)11 SNET 1986 Stock Option Plan as amended March 1, 1993 (Exhibit 10(iii)(A)11 to 1992 Form 10-K dated 3/23/93, File No. 1-9157). 10 (iii)(A)12 SNET Retirement and Disability Plan for Non- Employee Directors as amended April 14, 1993. 10 (iii)(A)13 SNET Non-Employee Director Stock Plan effective January 1, 1994 (Exhibit 4.4 to Registration No. 33-51055, File No. 1-9157) 10 (iii)A)14 Description of SNET Executive Retirement Savings Plan. 12 Computation of Ratio of Earnings to Fixed Charges. 13 Pages 18 through 48 of the registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1993. 21 Subsidiaries of the Corporation. 23 Consent of Independent Accountants. 24a Powers of Attorney. 24b Board of Directors' Resolution. 99a Annual Report on Form 11-K for the plan year ended December 31, 1993 for the SNET Management Retirement Savings Plan will be filed as an amendment prior to June 30, 1994. 99b Annual Report on Form 11-K for the plan year ended December 31, 1993 for the SNET Bargaining Unit Retirement Savings Plan will be filed as an amendment prior to June 30, 1994.

Dates Referenced Herein   and   Documents Incorporated By Reference

This 10-K Filing   Date   Other Filings
12/16/92
12/31/92
1/1/93
1/15/93
3/1/93
3/31/93
4/2/93
4/14/93
5/24/93
7/1/93
7/2/93
7/7/93
7/9/93
7/22/93
8/13/93
9/8/93
10/1/93
10/9/93
10/21/93
10/22/93
11/3/93
12/1/93
12/3/93
12/8/93
12/15/93
12/22/93
For The Period Ended12/31/9310-K/A
1/1/94
1/7/94
1/13/94
1/19/94
1/24/948-K
1/25/948-K
2/28/94
Filed On / Filed As Of3/23/94
3/28/94
4/1/94
6/30/9410-Q
7/1/94
8/10/94
 
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